Office of the Auditor General Hemisphere House 9 Church Street Hamilton HM 11, Bermuda Tel: Fax: (441)296-3148 (441)295-3849 Email: auditbda@ibl.bm AUDITOR'S REPORT To the Board of Governors I have audited the statement of revenues and expenses and fund deficit of The Governors of the Berkeley Institute Capitation Grant Account for the year ended March 31, 1997. This financial statement is the responsibility of the Board of Governors. My responsibility is to express an opinion on this financial statement based on my audit. I conducted my audit in accordance with auditing standards generally accepted in Bermuda and Canada. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In my opinion, the financial statement presents fairly, in all material respects, the financial position of The Governors of the Berkeley Institute Capitation Grant Account as at March 31, 1997 and the results of its operations for the year then ended in accordance with the stated accounting policy as described in note 2 of the financial statement. Hamilton, Bermuda December 15, 1999 Larry T. Dennis, C.A. Auditor General 329 E GOVERNORS OF THE BERKELEY INSTITUTE CAPITATION GRANT ACCOUN STATEMENT OF REVENUES AND EXPENSES AND FUND DEFICIT FOR THE YEAR ENDED MARCH 31, 1997 1997 1996 $ $ 423,100 21,471 434,800 4,000 444,571 438,800 239,026 62,419 44,874 23,410 14,758 13,897 13,293 12,363 1,084 1,560 260,543 64,155 45,608 40,488 3,178 10,778 10,479 4,900 4,708 1,650 REVENUES Government grant Donations EXPENSES Salaries, wages and employee benefits Departmental expenses Electricity Maintenance - grounds and buildings Maintenance - furniture and equipment Office supplies Telephone Cleaning supplies Bank charges and interest Insurance Miscellaneous 741 426,684 EXCESS OF REVENUES OVER EXPENSES (EXPENSES OVER REVENUES) 17,887 447,228 (8,428) FUND DEFICIT, BEGINNING OF YEAR 175,014 166,586 FUND DEFICIT, END OF YEAR 157,127 175,014 12,717 51,518 92,892 11,248 89,616 74,150 157,127 175,014 REPRESENTED BY: LIABILITIES Bank overdraft Accounts payable Amount due to the Board of Governors (note 4) The accompanying notes are an integral part of this financial statement 330 THE GOVERNORS OF THE BERKELEY INSTITUTE CAPITATION GRANT ACCOUNT NOTES TO THE FINANCIAL STATEMENT MARCH 31, 1997 1. AUTHORITY The Berkeley Institute is governed by the Berkeley Institute Act 1933 ("the Act") and its subsequent amendments. The Act provides for the management of the school by "The Governors of the Berkeley Institute". The Governors of the Berkeley Institute are empowered to pass bye-laws for the proper administration of the real estate, funds and investments vested in it by the Act. The Governors of the Berkeley Institute Capitation Grant Account shows only the transactions and deficit of the Capitation Grant Account. As such, the financial statement does not purport to show all the transactions, assets, liabilities and equity of the Berkeley Institute. 2. ACCOUNTING POLICY Physical Assets Physical assets such as inventories of supplies, furniture and equipment are charged in the year of acquisition. 3. ECONOMIC DEPENDENCE The Governors of the Berkeley Institute Capitation Grant Account is economically dependent on the Government of Bermuda for its daily operations and cash flow. 4. AMOUNT DUE TO THE BOARD OF GOVERNORS The amount due to the Board of Governors is interest free and has no fixed terms of repayment. 5. STATEMENT OF CASH FLOWS A statement of cash flows has not been prepared, as it would not provide additional useful information. 6. COMPARATIVE FIGURES Certain of the 1996 figures have been reclassified to conform to the 1997 financial statement presentation. 331 BERMUDA ofwie S^Uodotm^ c/esnewa/ AUDITOR'S REPORT To the Minister of Finance I have audited the balance sheet of the Hospital Insurance Fund as at March 31, 1997 and the statements of revenues and expenses and fund deficit and cash flows for the year then ended. These financial statements are the responsibility of the Fund's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in Bermuda and Canada. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In my opinion, these financial statements present fairly, in all material respects, the financial position of the Hospital Insurance Fund as at March 31, 1997 and the results of its operations and its cash flows for the year then ended in accordance with generally accepted accounting principles in Bermuda and Canada. Larry T. Dennis, C.A. Auditor General Hamilton, Bermuda July 16, 1999 Address all correspondence to the Auditor General: P.O. Box HM 2891. Hamilton HM LX. Bermuda • Tel (441) 297-7961 • Fax (441) 295-3849 • E-mail: auditbda@ibl.bm HOSPITAL INSURANCE FUND BALANCE SHEET MARCH 31, 1997 1997 1996 $ $ ASSETS CURJRENT ASSETS Cash including deposits of $529,361 (1996 - $502,635) Accrued interest Premiums due from policyholders, net of allowance of $20,000 (1996 -$25,000) Due from the Mutual Re-insurance Fund (note 4) 919,490 6,006 1,385,515 8,567 141,265 153,138 196,492 1,066,761 1,743,712 662,822 1,487,233 186,388 105,790 122,875 158,778 91,806 1,077,875 1,737,817 (11,114) 5,895 1,066,761 1,743,712 LIABILITIES AND FUND DEFICIT CURJRENT LIABILITIES Provision for claims (note 5) Due to the Consolidated Fund of the Government of Bermuda (note 6) Policyholder premiums received in advance Due to the Mutual Re-insurance Fund (note 4) FUND (DEFICIT) EQUITY The accompanying notes are an integral part of these financial statements. 333 HOSPITAL INSURANCE FUND STATEMENT OF REVENUES AND EXPENSES AND FUND DEFICIT FOR THE YEAR ENDED MARCH 31, 1997 1997 1996 $ $ 3,993,351 529,679 48,165 3,743,606 522,794 36,863 4,600 4,571,195 4,307,863 4,073,064 349,575 145,565 20,000 3,450,326 325,080 134,878 25,000 4,588,204 3,935,284 REVENUES Policyholder premiums Prescribed sum from the Mutual Re-insurance Fund (note 4) Interest Licensing fees EXPENSES Claims incurred (note 5) Premiums ceded to the Mutual Re-insurance Fund (note 4) Administrative expenses Bad debt expense EXCESS OF (EXPENSES OVER REVENUES) REVENUES OVER EXPENSES FUND EQUITY (DEFICIT), BEGINNING OF YEAR FUND (DEFICIT) EQUITY, END OF YEAR (17,009) 372,579 5,895 (366,684) (11,114) The accompanying notes are an integral part of these financial statements. 334 5,895 HOSPITAL INSURANCE FUND STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 1997 1997 1996 $ $ CASH FLOWS FROM OPERATING ACTIVITIES: Excess of (expenses over revenues) revenues over expenses (17,009) 372,579 2,561 11,873 196,492 (824,411) (1,338) (18,973) 27,208 583,844 27,610 13,984 122,875 20,722 4,733 Changes in non-cash working capital: Decrease (increase) in accrued interest Decrease (increase) in premiums due from policyholders Decrease in due from the Mutual Re-insurance Fund (Decrease) increase in provision for claims Increase in due to the Consolidated Fund of the Government of Bermuda Increase in policyholder premiums received in advance Increase in due to the Mutual Re-insurance Fund (449,016) (DECREASE) INCREASE IN CASH AND DEPOSITS CASH AND DEPOSITS, BEGINNING OF YEAR CASH AND DEPOSITS, END OF YEAR 616,196 (466,025) 988,775 1,385,515 396,740 919,490 1,385,515 The accompanying notes are an integral part of these financial statements. 335 HOSPITAL INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 1997 AUTHORITY The Hospital Insurance Fund ("the Fund") was established to provide hospital and medical insurance for all residents of Bermuda, irrespective of age and state of health. The Fund and the Hospital Insurance Commission ("Commission" - which administers and manages the Fund) were established under The Hospital Insurance Act, 1970 and subsequent amendments ("the Act"). In general, the Fund receives all policyholder premiums and pays all policyholder claims (subject to prescribed premium rates and claims limits). In addition, certain revenues (including fees with respect to licensing of third party insurers and approved schemes, as defined by the Act) and certain expenses incurred by the Commission are included in these financial statements. Policies of insurance are written exclusive of claims related to the indigent, aged or youth (termed subsidy claims, as further defined by the Act) which are paid from the Consolidated Fund of the Government of Bermuda. In addition, claims incurred by the Fund are exclusive of claims with respect to haemodialysis treatment, long-stay hospital care, hospice care and diabetic counselling which are settled by the Mutual Re-insurance Fund ("MRF") for which the Fund pays a rated premium based on the number of insureds' under the Fund's insurance program (as further defined in the Act). ACCOUNTING POLICIES These financial statements have been prepared in conformity with accounting principles generally accepted in Bermuda and Canada and include the following significant accounting policies: (a) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the Commission to make estimates and assumptions that affect the reported amounts of assets and liabilities and of revenues earned and expenses incurred during the reporting period. Actual results could differ from those estimates. (b) Licensing fees and policyholder premiums Licensing fees (derived from third party licensed insurers and employees licensed to operate approved schemes) and policyholder premiums (which are due monthly) are recorded on the accrual basis. 336 HOSPITAL INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 1997 2. ACCOUNTING POLICIES (continued) (c) Provision for claims The provision for claims comprises both reported claims which are outstanding as at the balance sheet date together with the Commission's estimate of claims incurred but not reported as at the balance sheet date. Although the Commission believes that the provision for claims is adequate, there is no absolute assurance that the ultimate settlement of the liability may not be greater or less than that which has been estimated as at the balance sheet date. The method of making such estimates and establishing the provision for claims is continually reviewed and updated, and any resulting adjustments will be reflected in the statement of revenues and expenses and fund deficit in the year in which they become known. (d) Credit risk Credit risk is the risk that issuers of certificates of deposit owned by the Fund will default, or other parties which owe the Fund money, will not pay. The Fund minimizes this risk by adhering to a conservative investment strategy, by maintaining sound credit and collection policies, and by providing for any amounts deemed uncollectible. An allowance for doubtful accounts has been estimated by the Commission with regard to policyholder premiums as at the balance sheet date. 3. RELATED PARTY TRANSACTIONS The Bermuda Hospitals Board, the MRP and the Fund are under the common control of the Government of Bermuda. In addition, the Fund and the MRP are under the direct management, supervision and control of the Commission which is under the direct control of the Minister of Finance. DUE FROM/TO THE MUTUAL R P - N S U R A N C E FLND The MRP acts as a re-insurer of the Fund (as prescribed by the Act) with respect to certain claims. The premiums due are based on rates per insured as defined by the Hospital Insurance (Standard Premium) Regulations 1993. In addition, the MRP is required to remit a prescribed sum to the Fund as further defined by the Hospital Insurance (Mutual Reinsurance Fund)(Prescribed Sum) Order 1993. The sum to be paid amounted to $1 per month, per insured from April 1, 1993. As at March 3 1 , 1 9 9 7 the amount due to the MRP represents the net of the above defined amounts together with certain administrative expenses incurred by the Fund but recoverable from the MRF. 337 HOSPITAL INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 1997 PROVISION FOR CLAIMS The majority of claims are submitted by the BHB on behalf of patients/insureds. These claims are valued in accordance with the Bermuda Hospitals Board (Hospital Fees) Regulations 1980 and 1996. The movement in the provision for claims is as follows: 1997 $ Balance, beginning of the year 1996 $ 1,487,233 903,389 Bermuda Hospitals Board Portability and medical 3,244,035 829,029 2,750,365 699,961 Total incurred 4,073,064 3,450,326 Bermuda Hospitals Board Portability and medical 4,011,856 885,619 2,346,801 519,681 Total paid 4,897,475 2,866,482 662,822 1,487,233 406,853 255,969 1,174,674 312,559 662,822 1,487,233 Claims incurred: Claims paid: Balance, end of year Represented by: Bermuda Hospitals Board Portability and medical 6 DUE TO THE CONSOLIDATED FUND OF THE GOVERNMENT OF BERMUDA . The balance due to the Consolidated Fund of the Government of Bermuda ("Consolidated Fund") comprises unpaid administrative expenses incurred by the Consolidated Fund on behalf of the Fund and the MRF, net of subsidy claims paid by the Fund but recoverable from the Consolidated Fund. 7. COMPARATIVE FIGURES Certain of the 1996 figures have been reclassified to conform to the 1997 financial statement presentation. 338